Multi-Link Leisure Developments Ltd v North Lanarkshire Council
| Jurisdiction | Scotland |
| Judgment Date | 20 December 2009 |
| Neutral Citation | [2009] CSIH 96 |
| Docket Number | No 21 |
| Date | 20 December 2009 |
| Court | Court of Session (Inner House) |
Court of Session Inner House Extra Division
Lord Carloway, Lord Hardie, Temporary Judge Sir David Edward QC
Words and phrases - Lease and option to purchase - "Full market value"
By lease dated 18 January and 11 February 2000, with a date of entry of 1 June 1999, the defenders let land to the pursuers with an option to purchase. The term of the lease was 50 years from the date of entry. Clause 9 of the lease provided that the tenants were to occupy and use the subjects for the development of a pay and play golf course and ancillary activities and no other purpose without the prior written express consent of the landlords. If the golf course was not developed within five years the lease was to terminate. The golf course was developed and the land continued to be used for that purpose. Clause 18 granted the tenants an option to purchase the land, the purchase price to be equal to the full market value of the let subjects as at the date of entry for the proposed purchase as determined by the landlords of agricultural land or open space for development as a golf course. The parties failed to agree on the meaning of the phrase "of agricultural land or open space suitable for development as a golf course" in terms of cl 18.2 thereof.
In 2005, the tenants' solicitors opened negotiations with the landlords for purchase of the land under the option. The landlords proposed a purchase price of £500,000 subject to the tenants entering into a minute of agreement and granting a standard security to the effect that an additional sum would be paid in the event of a change of use generating a higher value for the land. The tenants did not accept this proposal and negotiations were resumed in 2007 but the parties failed to reach agreement. The tenants' solicitors served a "Notice to Exercise Option" in October 2007, and following ensuing negotiations the landlords in November 2008 fixed the price at £5.3 million and thereafter served formal notice on the tenants requiring them to pay with 28 days failing which the landlords would be entitled to rescind the cl 18 option and the missives purportedly entered into between the parties. In 2008, a local plan had included the area as a potential area for housing led development.
The tenants raised an action seeking declarator and reduction, the effect of which would be to require the landlords to sell the subjects for £500,000, or alternatively for a price to be fixed on the basis of the full market value of the subjects, at 9 October 2008 "as agricultural land or open space suitable for a golf course". The landlords counterclaimed for declarator that the option to purchase and the contract resulting for the notice dated 8 October 2007 were validly rescinded by virtue of the notice of 25 February 2009 and that the option was spent and could no longer be exercised by the tenants. The tenants maintained that the landlords were to have regard in fixing full market value to development and use as a golf course. The landlords maintained that an assessment of full market value in terms of the clause must include an assessment of the development potential of the land apart from use as a golf course.
Following debate, the Lord Ordinary on 31 July 2009 held that the pursuers' interpretation of cl 18.2 was correct and granted decree accordingly. The defenders reclaimed against that decision to the Inner House.
Counsel for the defenders submitted that full market value fell to be distinguished from existing use value. The tenants were to incur the development costs of creating the golf course, but if the option to purchase were exercised there would be no restriction on future development and that factor must be taken into account in assessing the full market value.
Counsel for the pursuers relied on the Lord Ordinary's reasoning in submitting that the assessment of value was to be based solely on the land as agricultural land or open space suitable for development as a golf course.
Held that the phrase "full market value" should be construed as meaning what it said, and considerations that may be relevant to market value (which may be many) were not to be ignored unless there were express words to that effect (para 28); and reclaiming motion allowed.
Multi-Link Leisure Developments ltd raised an action against North Lanarkshire Council seeking, inter alia, declarator and reduction. The defenders counterclaimed for declarator. The Lord Ordinary (Glennie) following a debate held on 22 and 23 July 2009, on 31 July 2009 granted declarator and reduction as sought by the pursuers. The defender reclaimed against that decision to the Inner House.
Cases referred to:
Bank of Credit and Commerce International SA v AliELRWLRUNK [2002] 1 AC 251; [2001] 2 WLR 735; [2001] 1 All ER 961
Bank of Scotland v Dunedin Property Investment Co LtdSCUNK 1998 SC 657; 1999 SLT 470; 1998 SCLR 531
Charter Reinsurance Co Ltd v FaganELRWLRUNK [1997] AC 313; [1996] 2 WLR 726; [1996] 3 All ER 46
Gajapatiraju v Revenue Divisional Officer, VizagapatamELRUNK [1939] AC 302; [1939] 2 All ER 317
Griffiths v WE and DT Cave Ltd (1999) 78 P & CR 8; (1998) 95 (48) LSG 32
Investors Compensation Scheme Ltd v West Bromwich Building SocietyWLRUNKUNK [1998] 1 WLR 896; [1998] 1 All ER 98; [1998] 1 BCLC 531
Little Hayes Nursing Home Ltd v Marshall (1993) 66 P & CR 90; [1993] EG 32; [1993] NPC 29
Transport for London (formerly London Underground Ltd) v Spirerose Ltd (in administration) sub nom Spirerose Ltd (in administration) v Transport for London; Re 64-70 Holywell Lane, London, EC2UNKWLRUNK [2009] UKHL 44; [2009] 1 WLR 1797; [2009] 4 All ER 810; [2009] RVR 225
Textbooks etc. referred to:
Lawrence, DM, Modern Methods of Valuation (9th Johnson, Davies and Shapiro ed, Estates Gazette, London, 2000), pp 2-4, 279, 280, 403-406
McBryde, WW, The Law of Contract in Scotland (3rd ed, W Green/Scottish Universities Law Institute...
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